Iconic American dining chain TGI Fridays has filed for Chapter 11 bankruptcy as it navigates a challenging business landscape impacted by rising costs and shifting consumer habits.
The company, founded in 1965 and known for its casual dining experience, cited lingering pandemic effects, inflation, and interest rate hikes as key factors in its financial distress. TGI Fridays aims to restructure its operations, potentially sell assets, close additional locations, and renegotiate leases as it works toward stabilizing its business model.
In 2024, the restaurant industry faced significant economic pressures, including labor shortages, higher ingredient costs, and post-pandemic shifts in consumer preferences toward fast-casual or at-home dining. TGI Fridays joined a growing list of chains affected by these challenges; in recent months, brands like Red Lobster, BurgerFi, and franchisees of chains such as Pizza Hut and Arby’s have also filed for bankruptcy or closed underperforming locations to manage costs.
The Dallas-based TGI Fridays reported assets and liabilities between $100 million and $500 million in its petition to the US Bankruptcy Court for the Northern District of Texas. Additionally, the company listed $46.8 million in term-loan and revolving-credit debt, alongside $104 million in unsecured creditor obligations, including debts to marketing and media firms. As part of its bankruptcy plan, TGI Fridays secured $23.9 million in debtor-in-possession financing to maintain its operations, allowing it to continue serving customers and supporting its franchise network throughout the proceedings.
The company’s US-based locations owned by third-party franchises will not be impacted by the filing. Internationally, TGI Fridays will continue to operate 316 franchise locations. Earlier in 2024, TGI Fridays’ plans to sell its US-based corporate-owned units to UK franchise operator Hostmore fell through. Hostmore subsequently entered administration, affecting 87 UK TGI Fridays locations, while the US entity continues to assess its operational footprint.
The restructuring process may involve TGI Fridays selling certain assets or shifting to a fully franchised model, following a similar path taken by other restaurant chains in recent years.
TGI Fridays currently holds nearly $50 million in unused gift card liabilities, which has raised concerns among franchisees. Gift card redemptions tend to spike following a bankruptcy announcement, as customers look to use their credit before potential closures. Franchise operators are advocating for a reimbursement fund to cover potential increases in gift card use at franchise-owned locations.
During its bankruptcy hearing, TGI Fridays assured the court it would honor gift cards, describing them as essential for maintaining customer loyalty and driving weekly sales. Franchisees, while supportive, have requested a secure reimbursement arrangement to manage any “run on gift cards.”
TGI Fridays’ restructuring marks a broader industry shift toward adaptation, as chains and individual restaurants work to balance economic headwinds and evolving consumer preferences. The company has already closed 50 locations this year, with plans to further streamline its corporate structure and optimize operational efficiencies. The shift in dining preferences, with consumers favoring quick-service options over traditional sit-down dining, has led brands to consider hybrid models and more responsive business strategies.
With input from the Street, USA Today, and Bloomberg.
